NEWS - 11

Video (sponsored forum): Ucits structures remain attractive to hedge funds

30 Aug 2011

Alceda Fund Management, Bank of America Merrill Lynch, KB Associates and fund management company Salus Alpha Capital debate some of the reasons hedge funds are interested in Ucits vehicles.

Michael Sanders, CEO of Alceda Fund Management, Eric Personne, head of fund solutions group at Bank of America Merrill Lynch, and Claire Cawley, executive director at KB Associates, together with Günther Schneider, hedge fund specialist with Salus Alpha Capital, discuss the attractions of Ucits structures for hedge funds as well as some of the negative aspects.

For Sanders there are two reasons why a hedge fund manager should be interested in Ucits vehicles. He cited institutional investor preference for more regulated, liquid and transparent structures as well as easier distribution of the fund, not only in the European Union but around the globe.

"There is a huge appetite for launching Ucits funds," agreed Cawley, "and it's driven by investor demand." After the 2008 crisis investors are looking for products offering a regulated solution and solutions that "look like a safe house". "I think you also find a lot of US managers are looking towards Ucits for the purpose of gaining access to a large number of markets," she concluded.

Personne thinks US managers are now aware of Ucits whereas a couple of years ago they were not interested. "If you believe what you deliver is real added value, and alternative investment claims it is added value and I do believe it is, there is no reason why this product shouldn't reach the largest possible audience," he declared.

Hedge fund specialist Schneider confirmed Salus Alpha Capital was one of the first hedge funds to move into Ucits. "The reasons: it's a standardised package, it's safe assets and finally you have a very defined liquidity - and that's always been missing in the offshore world."

View the full filmed discussion

NEWS - 9

Hedge Funds Review – Video: interview with Günther Schneider, hedge fund specialist, Salus Alpha

Salus Alpha, with $1.1 billion under management, believes investors want regulated products and has been offering its hedge funds and funds of hedge funds as onshore products since 2001.

From inception Salus Alpha was keen to offer investors transparency and liquidity, according to Günther Schneider, head of global business development and a hedge fund specialist at Salus Alpha Financial Service (Europe). He is proud of the fact that Salus Alpha, now with over $1.1 billion of assets under management in a variety of vehicles, was one of the first managers to offer daily liquid Ucits funds in all its hedge fund strategies.

“Ucits has become such a strong story recently,” said Schneider, but he believes investors need to approach alternative products by looking at the strategy as well as the asset managers’ capabilities to deliver performance. “Sometimes people talk too much about the vehicle and do not concentrate on the asset strategy under management,” he noted.

When asked if daily liquidity is more of a marketing ploy, Schneider is adamant that liquidity is “becoming more important” for investors. “If you look at markets and market conditions, people like the idea of having liquid portfolios. We’ve been offering daily liquid alternative investments since 2003 so we’ve been used to structuring products like that and offering it to investors. Yes, they like it. As soon as they see it is possible, they take advantage of [daily liquidity],” he stated.

In a wide-ranging interview, Schneider explained how he could offer an event driven strategy in a Ucits format as well as offering advice to other managers on the benefits of having an extensive network of offices close to investors. He said it was important to have a “presence on the ground”, particularly in the Asian markets. Salus Alpha has offices in Singapore and Hong Kong.

On the question of regulation, Schneider admitted new laws will “have an impact on all asset managers but hedge funds/alternative managers are more in the focus [as far as regulators are concerned] than others”. This, he said, was a good thing as he believes some of the issues being pushed by regulators, like transparency and liquidity, will be good for investors and the market in general. He advocated co-operation with lawmakers and active engagement, rather than sitting on the sidelines as politicians draw up new rules.

Schneider also talked about the attractions of managed futures for investors. He thinks investors will become more discriminating of which CTA/managed future fund managers they choose in future as those who do well in less favourable markets continue to offer strong performance compared with others.